Empowering the Provider: A Better Way to Resolve Medicare Hospital Payment Disputes

- Phyllis E. Bernard

This article addresses one aspect of the current health care reform debate: payment to institutional health care providers from part A of the Medicare program fund. The adjudicatory committee utilized to settle administrative disputes is the Provider Reimbursement Review Board (PRRB) which handles disputes between institutional health care providers and the Health Care Financing Administration (HCFA). However, in order for the PRRB to agree to hear a case, the amount in controversy must equal or exceed $10,000. The current argument the author discusses is whether the PRRB has outlived its usefulness and should be eliminated or whether expanding the PRRB is necessary due to the increase in caseload.

The HCFA reimburses health care providers for reasonable costs of services. The process begins with a review of the provider costs, then may move on to an intermediary review and finally an audit. Any adjustment made against the provider is a loss in reimbursements. The provider has the right to an exit conference with the intermediary and if the provider is not satisfied with the outcome, it has the right to obtain a review by the PRRB, as long as the amount in controversy is fulfilled. Hospitals magazine indicates that a provider challenging HCFA reimbursement in front of the PRRB has a 40% chance of receiving a favorable decision.

If a final determination is placed in a Notice of Program Reimbursement (NPR), a provider may then seek a PRRB appeal within 180 days of the NPR. The process is adversarial in form, however the Board may develop flexible case-by-case procedures. The proceedings do closely follow the formal APA adjudicatory trial-type process. Each side may submit papers, findings of fact and evidence to which the Board weighs during a joint-decision conference. The PRRB's goal is to attain unanimity with all of its decisions. The entire process is made more complex simply because most issue in front of the PRRB concern interpretive rules.

Once a decision is final, only the HHS Secretary, through the Administrator of HCFA, may review it. This sua sponte review process has been dually criticized, first, because of the broad discretion left in the hands of one person and second, because it undermines the PRRB process. This has put a great strain on the relationship between the PRRB and the HCFA. Two reports have documented this strain: a report by the General Accounting Office (GAO) and HCFA's reorganization plan for the PRRB. In addition, in 1994 HCFA reorganized the PRRB, severely limiting its independent functions and increasing the struggle between the two.

This strain is only one of the problems with the process. Another is the backlog of caseload. In the past twenty years, appeals filed have substantially increased. An area of concern is that there is a lack of information giving explanation to this backlog. In turn, the backlog has caused a slow down in the process and there is now a long waiting period for pursuing valid claims. The author contends that this may be perceived as means of rationing justice. Consequently, she states that is not a reasonable justification for PRRB's existence
and the development of an alternative process is necessary.

The PRRB is a unique adjudicatory system in comparison with other federal administrative processes. The author distinguishes the PRRB from the Occupational Safety and Health Review Commission (OSHRC) and the Mine Safety and Health Review Commission (MSHRC) by explaining how the Secretary of the HHS appoints PRRB members, not the President. All three boards serve for a fixed term and can be removed for cause, yet the PRRB's definition of cause is undetermined. Each board performs a neutral third-party review of the facts, but the PRRB does not have the benefit of enabling legislation providing for the placement of administrative operations and functions as the other Boards. Consequently, this has led to a struggle between HCFA and the PRRB over the staff and operations of the tribunal's work.

Another distinguishing factor is the PRRB's use of administrative judges (AJs) and not Administrative Law Judges (ALJs). The Administrative Conference (ACUS) recommended to Congress that it convert these AJs to ALJs, separating the functions of the PRRB and possibly increasing the integrity of the PRRB process. Yet the increase in prospective payment systems and evolving Medicare laws may render obsolete the financing issues appealed to the PRRB or the need for this separation.

In the past, most Medicare adjudications were brought by providers in order to determine what services are "necessary and proper." The disputes with the largest dollar amounts mainly pertained to the largest financial and operational institutions: hospitals. But other such disputes, dealing with prospective payments, may cause the Board to change its structure and tasks. However, the three major due process issues that created the need for the PRRB will still be relevant whether the PRRB continues to exist. Those issues are categorized as follows: challenges to intermediary factfinding and methodology; challenges to regulatory interpretation as applied to the facts; and challenges to statutory interpretation. Each category had a significant change on the Administrative adjudicatory process such as giving providers a forum in which to be heard and setting out a road map for the Article III courts as well as the provider.

In the 1980's the health care industry grew rapidly, in size and complexity, leaving gaps within payment policy. The PRRB took upon itself to fill in those gaps on a case-by-case basis. There are two major types of cases the Board explored: group appeals cases and the impact of corporate restructuring on Medicare payments. In each type of cases, group appeals and corporate restructuring, the PRRB found its role diminished in significance and that it generally lacked in consistency, respectively.

With the introduction of the Prospective Payment System (PPS), the content of the PRRB work changed significantly. Along with the PPS, Congress established the Medicare Geographic Classification Review Board (MGCRB) to allow hospitals to protest inaccuracies, to which most are completed over the telephone. This may lead to the demise of the PRRB's time consuming, backlogged adjudicatory process. The following are a detail of five models for reconfiguring the adjudicatory functions of the PRRB: 1. Maintain current structure of PRRB; 2. Undo reorganization and reduce HCFA control; 3. Maintain current PRRB structure but eliminate HCFA sua sponte review; 4. Significantly change PRRB to incorporate alternative dispute resolution (ADR) and ALJs; 5. Eliminate the PRRB entirely and transfer functions to Departmental Board of HHS.

The author concludes that the Provider Reimbursement Review Board provided an important and significant role in the past, shaping provider payment Medicare policies. However, its future role is severely limited due to changes in the current Medicare system and its curtailment of independent functions by the 1994 reorganization. If the PRRB is not vested with autonomous control over its operations, it should scaled back placing all cases in ADR or eliminated entirely with a transfer of functions to the Departmental Appeals Board of HHS.

Abstract by Elizabeth M. Apisson

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